How to Ensure You Make a Loss in the Construction Industry (In Six Very Easy Steps)…

As most Contractors are aware, the construction industry is a challenging market sector in which it really is quite simple to lose money.

With the collapse of Carillion and harsh market conditions in 2018, 780 companies fell into insolvency in the first quarter alone [1].

In a bid to provide certainty, in this blog we wanted to set out six key steps for you to follow to ensure failure within the industry.

Step One – Do Not Compile a Cost Plan
A robust cost plan is one of the key building blocks to facilitate the successful delivery of a construction project.

Following a cost appraisal, a cost plan is compiled by the quantity surveyor or cost consultant to set out the construction costs of the project.

The cost plan is a live document and will develop in detail and accuracy over the lifecycle of the project.

If you want to ensure the project runs over budget, potentially to the point whereby it can’t be completed due to lack of funds, ensure you don’t create a cost plan.

Step Two – Do Not Review Construction Contracts or Negotiate the Terms
Not reviewing the construction contract (i.e. sign it, put it in the draw and hope for the best) is a sure-fire way to find yourself in dispute with the client.

By blindly signing on the dotted line; main contract terms (which you haven’t even seen) become binding, Liquidated Ascertained Damage levels (you may not be able to afford) may be levied against you and risk conditions which you wouldn’t have accepted (in a million years) if you had known, are carried by you.

Further, having negated to review the contract; you don’t need to negotiate the terms. After all, for a project to be successful; the terms of the contract should reflect the tender offering and the subsequent acceptance of that offering.

So, if you want to fail in contracting; ensure you do not have a quantity surveyor review the contract document to ensure the terms reflect your intended offering. Just proceed on the basis of the contract proposed by the client.

After all, it’ll save you a couple of hundred pounds if you don’t have it reviewed. It’s worth it, right?

Step Three – Do Not Compare Tenders. Accept the First Price
Another good way to ensure losses within the construction industry is to not test the market when procuring materials or services. Do not obtain a minimum of the three comparative quotations/tenders to ensure value, just accept the first price received.

Furthermore, ensure a quantity surveyor does not assess the quotations to confirm they are comparable in terms of inclusion and presentation`.

This will ensure the best price is not obtained and will guarantee you do not receive the best value.

Step Four – Ensure you accept verbal instructions (no written instruction required…)
“The site manager said just get on with it and they’ll sort the paperwork later… he’s a good guy, it’ll be fine”, sound familiar?

To ensure you don’t receive payment for variations, act on verbal instructions without obtaining written confirmation as set out within the contract (remember the contract you didn’t read in step two?).

This will ensure any work you deliver outside of the scope of the works is carried out at your own cost.

Step Five – Pay No Attention To the Construction Programme (Just Keep One Eye On The End Date).
If you want to pave the way to an unsuccessful project conclusion, ensure you pay no attention to the construction programme.

Pay no attention to key dates or activity sequence.
Keep an eye on the completion date and if you miss it, wait to see what happens (hopefully nothing).

Step Six – Do Not Employ a Professional Quantity Surveyor
Professional Quantity Surveyors provide a multitude of support services (see our previous blog (here) including:

– Monitoring Budget & Forecast
– Preparation of Applications / Valuations / Payment Certificates
– Assess and Measure Works Delivered and Variations
– Administer Programme Amendments
– Control Cost
– Maintain Ongoing Value Engineering
– Provide Project Management
– Manage Disputes
– Advice on Contractual Disputes

Conclusion
The steps outlined above are just a few of the ways in which a construction contractor can ensure they deliver a construction project over budget, potentially over programme and at a loss.

Alternatively, where you wish to ensure the successful delivery of projects within the industry, ensure you DO NOT follow these steps.

Should you require support in any of the areas listed, contact us at info@kjtaylorconstruction.com or call on 0115 9336131.

[1] The Guardian Online report. https://www.theguardian.com/business/2018/oct/01/insolvencies-in-uk-building-firms-rise-20-after-carillion-collapse. Monday 1st October 2018.

Private Practice Quantity Surveyor (PQS) / Consultant Quantity Surveyor… What do they actually do? (How can they help?)

You hear the phrase all of the time ‘Consultant Quantity Surveyor’, ‘PQS’ or ‘Commercial Consultant’, but what do these titles convert to by means of help and support within the construction industry?

It can vary from practice to practice and consultant to consultant depending upon their specialism, however, in this blog, we wanted to give you a ‘general view’ as to the areas of support you can expect from a professional all-round quantity surveying practice.

Pre-Construction (Design phase)
Prior to construction is the perfect time engage a good PQS as they will offer support in several capacities:

Cost Planning
A professional quantity surveyor will work through the construction project requirements and carry out cost planning, value engineering, feasibility studies, value management, life-cycle costing and cost value benefit analysis to enable the client to assess the project financially.

In turn, the QS will compile the relevant financial information needed for the project; including bills of quantities (BoQ), tender documentation, construction forecast and budgets.

Contract Engagement
With an in-depth knowledge of construction contracts (including NEC3, NEC4, JCT, FIDIC, ICE and bespoke contract terms) this is the next key stage of the construction process in which the support of a professional quantity surveyor is vital.

Compiling and reviewing contract documents and identifying key risks contained within construction contracts is a fundamental role of the quantity surveyor.

With an expertise in interpreting contract clauses, the QS will ensure the contract (and the risk allocation) balances the risk as the parties as intended.

NOTE: A detailed contract review by a professional quantity surveyor prior to execution is an absolute MUST for specialist contractors within the construction industry (if I had a pound for each time I heard the statement ‘I didn’t know the contract said…’. A contract review can save a contractor a significant sum across a construction project).

In addition to the contract review, the PQS can take the lead in negotiating out any risks or clauses which are not viable or acceptable.

Construction Phase
Throughout the construction phase, the professional quantity surveyor really is pivotal to the financial, commercial and contractual delivery. A professional PQS will:

– Monitor Budget / Forecast
– Prepare Applications / Valuations / Payment Certificates
– Assess and measure works delivered and variations
– Administer Programme Amendments
– Control costs
– Maintain ongoing Value Engineering
– Provide Project Management
– Manage Disputes
– Advice on Contractual Disputes

Completion & Defects Period
Ensuring completion is accurately captured is critical to the project in terms of damages, delays, warranties, insurance and the commencement of the defect’s liability period and a professional quantity surveyor will be fundamental in ensuring this is executed correctly.

For further help and support in any of the areas discussed within this blog contact us at info@kjtaylorconsulting.com or 0115 9336131.